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Reasons to Retain Merit Medical (MMSI) Stock in Your Portfolio

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Merit Medical Systems, Inc. (MMSI - Free Report) is well-poised for growth in the coming quarters, backed by its strong product portfolio. A robust first-quarter 2022 performance, along with its solid international exposure, is expected to contribute further. However, headwinds related to higher consolidation in the healthcare industry, and the lack of direct sales and marketing capabilities persist.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 15.3% compared with a 10.5% fall of the industry and a 11.3% decline of the S&P 500.

The renowned medical devices provider has a market capitalization of $3.05 billion. The company projects 11% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 28.5% for the past four quarters, on average.

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Let’s delve deeper.

Strong Product Portfolio: We are upbeat about Merit Medical’s continued gains on the back of significant momentum of new products. We are also optimistic about the company’s product pipeline, including radio and electrophysiology products. This month, the company announced the launch of the SCOUT Mini Reflector, which has been designed for use in soft tissues, such as breast and lymph nodes.

The company, in April, launched the ReSolve Thoracostomy Tray, which has all products needed for performing a thoracostomy.

International Exposure: We are upbeat about Merit Medical’s current global operations, including its territories in Europe, the Middle East, Africa, Asia, Oceania, Central and South America, Mexico, and Canada. In the first quarter of 2022, Merit Medical confirmed that its international sales (44.5% of net sales) improved 13.8% from the corresponding period of 2021. This included increased sales of 18.1% in APAC operations, 46.1% in Rest of the World operations and 5% in EMEA operations.

Strong Q1 Results: Merit Medical’s robust first-quarter 2022 results buoy optimism. The company also saw solid segmental growth and growth across all product categories within its Cardiovascular unit. Solid product sales and robust performances in both the United States and outside were also witnessed. Strong execution and improving customer demand trends raised the overall top line. Expansion of the adjusted operating margin also bodes well.

Downsides

Higher Consolidation in the Healthcare Industry: Healthcare costs have risen significantly over the past decade. Thus, in order to provide healthcare solutions at a cheaper rate and eradicate competition, large-cap MedTech behemoths have started consolidating with mid-cap and small-cap companies. This enables the availability of healthcare products at low prices in the market. Per management, such trends compel Merit Medical’s customers to ask for price concessions in its products, which acts against its ongoing business strategies. This may also exert a solid downward pressure on the prices of Merit Medical’s products and reduce customer base.

Lack of Direct Sales and Marketing Capabilities: Merit Medical lacks direct sales and marketing capabilities in many countries. The company wholly depends on third-party distributors for the commercialization of products in countries like China, Japan, Russia and India. Per management, because of inefficiencies in the distributor base, Merit Medical often fails to successfully commercialize its products in these countries.

Estimate Trend

Merit Medical is witnessing a positive estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved a penny north to $2.50.

The Zacks Consensus Estimate for the company’s second-quarter 2022 revenues is pegged at $280.9 million, suggesting a 0.2% rise from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and ShockWave Medical, Inc. (SWAV - Free Report) .

AMN Healthcare, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 1.1%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.6%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has gained 13.8% against the industry’s 32.7% fall in the past year.

Patterson Companies, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 9.6%. PDCO’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%.

Patterson Companies has lost 1.8% compared with the industry’s 10.5% fall over the past year.

ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 44.9% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 189.9%.

ShockWave Medical has gained 7.9% against the industry’s 24.4% fall over the past year.

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